What I Have To Say About The Economy & Credit

Main menu

Monthly Archives: November 2014

Post navigation

Last week, Wells Fargo was the first private student loan lender to announce it will modify private student loans for borrowers that are facing financial hardship. While many private lenders have worked with borrowers, Wells Fargo is one of the first to announce that it will offer long term modifications to borrower payment plans. You can read the full press release here.

Discover Bank also announced that it would be launching a student loan repayment assistance program in early 2015, but the details of the program haven’t been released.

Private Loans Have Been A Struggle For Many Borrowers

The truth is, many borrowers have gotten themselves into financial trouble with private student loans. Federal student loans place limits on the amount students can borrow – theoretically for their own protection. However, when these loans are exhausted, some students turn to private loans to fill the gap.

Private loans typically have higher interest rates than Federal loans, and have far fewer protections for borrowers. There are also few choices in repayment plans beyond the standard fixed repayment.

Private Lenders Must Compete With Federal Programs

For borrowers, there has been a lot of confusion around private versus Federal loans. While Federal student loans offer various repayment programs, student loan forgiveness, and student loan consolidation options, private student loans do not.

This has made it difficult for private lenders to compete with the Federal government for traditional students. Instead, private lenders have focused on areas where the Federal programs don’t apply: medical school, law school, graduate loans, and more. But the risks are higher, and lenders face shareholders where the government does not.

It kills us, said Grant, founder and president ofAllGoodHome Improvements. His 40-employee company sells windows, roofing and siding upgrades to homeowners in Cincinnati and Pittsburgh.

Grant is not alone in his frustration.Cincinnati-area banks rejected nearly four in 10 applications for home improvement loans in 2013, aWCPOanalysis shows.Eight of the 11 most active home-improvement lenders rejected more loans than they originated last year. That has neighborhood leaders and remodeling executives all over the US worried about access to capital.

Grant is known for his TV commercial tagline: Well save you alaaahhtof money. But his sales managers moan when he quotes a low price on TV because they know the ads will lead to scores of bank rejections.

Before the 2008recession, Grant said, banks were rejecting about 15 percent of customers who applied for home improvement loans. The rejection rate jumped to 60 percent in the teeth of the recession. Now, its about 45 percent. Grant said his company is growing, but sales would be 40 percent higher if banks returned to their pre-recession approval rates.

Weve got a lot of files with nowhere to take them, he said.

Posted in Loans | Tagged loans | Comments Off on Funding the fixer upper: Banks stingy with home improvement loans in 2013

We all know medical school is expensive. But we found two valley doctors who graduated decades ago and the federal government says they still owe hundreds of thousands of dollars in student loans.

Meanwhile they live in nice homes and private country clubs in Palm Desert. Our visits to their practices were not exactly what the doctor ordered.

Were just asking why youre on this government list, News Channel 3s Natalie Brunell asked as she confronted Dr. Hilda Chalgujian, a Palm Desert psychologist.

Its none of your business, Chalgujian said.

Except as taxpayers, it is your business.

The US Department of Education list we found Chalgujians name on showcases doctors and dentists who went to medical school on your dime.

Its all part of the governments Health Education Assistance Loan program otherwise known as HEAL, which gave federally-guaranteed loans to grad students in health related fields beginning in the 1970s. Because of the high default rate, the program flatlined in the 1990s.

The government began releasing the list of defaulters in the hopes of shaming the doctors into paying up, but 846 around the country still havent. Together they owe more than $100 million.

Were just wondering why you havent paid back $124,000 worth of taxpayer-funded loans, Brunell said.

Unbelievable, Chalgujian said.

Were giving you a chance to speak and just answer these questions, Brunell said.

Because, because they cut me off, Chalgujian said.

When Dr. Chalgujian stopped to talk with us, she said shes been trying to reach a settlement with the Feds over her outstanding balance.

A lot of people have student loans, why has it taken you so long to pay? Brunell asked.

Because you pay interest and penalties, thats all you pay over time, interest and penalties, Chalgujian said.

We heard a similar answer from the other valley doctor on the list, Palm Desert chiropracter Dr. Luis Lopez, who owes nearly $180,000.

All of that is interest and penalties over the years. Ive probably paid back about $45,000 over the years, Lopez said.

The amount he paid is still less than what the government says he originally borrowed three decades ago.

But instead of pushing away our cameras, he spoke candidly, saying his practice has never made enough for him to pay back the loan.

To make matters worse, he said he filed for Chapter 13 bankruptcy a few years ago. meaning he doesnt qualify to take out a private loan to settle this one with Uncle Sam.

They offered me last time, if you can qualify for $50,000 well accept $50,000 and I cant. Ive tried, I cant get that loan right now, Lopez said.

Still we have to wonder how in 2007 Lopez could afford to buy a three-bedroom house in Palm Desert worth more than $400,000.

And about how Dr. Chalgujian affords the Palm Valley Country Club, which on Facebook she boasts has a great gym and spa.

Meanwhile the government continues to sit in the waiting room, for these doctor debts to be paid.

It has disrupted my life, as you can see, and if this goes on TV Im going to be very unhappy, I will follow up, said Chalgujian.

Posted in Loans | Tagged loans | Comments Off on SPECIAL REPORT: Valley doctors who owe government in defaulted student …

Wells Fargo amp; Company (NYSE:WFC) reported net income of $5.7 billion, or
$1.01 per diluted common share, for second quarter 2014, up from $5.5
billion, or $0.98 per share, for second quarter 2013. For the first six
months of 2014, net income was $11.6 billion, or $2.06 per share, up
from $10.7 billion, or $1.90 per share, for the same period in 2013.

“Our strong results in the second quarter reflected the benefit of our
diversified business model and our long-term focus on meeting the
financial needs of our customers,” said Chairman and CEO John Stumpf.
“By continuing to serve customers we grew loans, increased deposits and
deepened our relationships. Our results also reflected strong credit
quality driven by an improved economy, especially the housing market,
and our continued risk discipline. We are committed to both maintaining
strong capital levels and returning more capital to our shareholders. In
the second quarter we increased our common stock dividend 17 percent and
repurchased 39.4 million shares. We remain dedicated to building
long-term shareholder value, and I am optimistic about the future as we
continue to focus on meeting the needs of our consumer, small business
and commercial customers.”

Chief Financial Officer John Shrewsberry said, “The primary drivers of
Wells Fargo’s business remained strong in the second quarter, with
broad-based loan growth, increased deposit balances, and improved credit
quality. Revenue increased linked quarter as the Company grew both net
interest income and noninterest income, a reflection of Wells Fargo’s
diversified business model. These solid fundamental business results led
to an increase in pre-tax income linked quarter. Net income was down as
the Company’s effective tax rate was lower in the first quarter due to a
$423 million discrete tax benefit.”

Net interest income in second quarter 2014 increased $176 million on a
linked-quarter basis to $10.8 billion driven by organic growth in
commercial and consumer loans and higher mortgages held for sale and
trading assets. Approximately one-third of the increase resulted from
the benefit of one additional business day in the quarter. Interest
income from variable sources, including purchased credit-impaired (PCI)
loan resolutions and periodic dividends, also improved slightly linked
quarter.

Net interest margin was 3.15 percent, down 5 basis points from first
quarter 2014 as strong customer driven deposit growth contributed to
higher cash and short-term investment balances. This deposit growth was
essentially neutral to net interest income, but had the effect of
diluting net interest margin approximately 5 basis points. Liquidity
funding actions taken to meet regulatory expectations also diluted the
margin by 1 basis point, but with minimal impact to net income. Higher
interest income from variable sources contributed 1 basis point to the
change in net interest margin linked quarter. The net impact of all
other balance sheet growth and repricing was essentially flat from first
quarter.

Noninterest Income

Noninterest income in the second quarter was $10.3 billion, up from
$10.0 billion in the prior quarter. Growth was broad-based and was
driven by increases in mortgage banking, trust and investment fees,
deposit service charges, and card fees. These increases were partially
offset by a decline in market sensitive revenue5, mainly
equity gains.

Trust and investment fees were $3.6 billion, up $197 million from first
quarter on higher investment banking and brokerage advisory, commissions
and other fees. Investment banking fees increased $164 million linked
quarter on broad-based growth. Brokerage advisory, commissions and other
fees were up $39 million from the prior quarter as asset-based fees
increased due to higher market valuations and net customer flows.

Mortgage banking noninterest income was $1.7 billion, up $213 million
from first quarter. During the second quarter, residential mortgage
originations were $47 billion, up $11 billion linked quarter, while the
gain on sale margin was 1.41 percent, compared with 1.61 percent in
first quarter. Net mortgage servicing rights (MSRs) results were
$475 million, compared with $407 million in first quarter 2014.

Noninterest expense increased $246 million from the prior quarter to
$12.2 billion, as a decline in seasonally-elevated compensation and
benefits costs from first quarter 2014 was offset by higher
revenue-based incentive compensation, increased salary expense due to
annual merit increases and the impact of one additional day in the
quarter, an $84 million linked-quarter increase in deferred compensation
benefit costs (offset in revenue) and a $205 million linked-quarter
increase in operating losses largely due to litigation accruals.
Expenses in the quarter also included higher outside professional
services and advertising expenses, which are typically lower in the
first quarter. The efficiency ratio was 57.9 percent in second quarter
2014, in line with first quarter 2014. The Company expects to operate
within its targeted efficiency ratio range of 55 to 59 percent in third
quarter 2014.

Income Taxes

The Company’s effective income tax rate was 33.4 percent for second
quarter 2014, compared with 27.9 percent in the prior quarter. The tax
rate for the first quarter included a net $423 million discrete tax
benefit primarily from a reduction in the reserve for uncertain tax
positions due to the resolution of prior period matters.

Loans

Total loans were $828.9 billion at June 30, 2014, up $2.5 billion from
March 31, 2014, driven by broad-based growth in commercial and
industrial, automobile, credit card, 1-4 family first mortgage and
commercial real estate loans. This growth was reduced by the transfer to
loans held for sale at the end of the quarter of $9.7 billion of
government guaranteed student loans, which were previously included in
the Company’s non-strategic/liquidating loan portfolio. Excluding this
transfer, total loans would have been up $12.2 billion, or 6 percent
(annualized), from first quarter. Core loan growth was $15.1 billion, as
non-strategic/liquidating portfolios declined $12.7 billion in the
quarter, including the $9.7 billion transfer. Average total loans were
$831.0 billion, up $7.3 billion from the prior quarter, mainly
reflecting growth in commercial and industrial, automobile and
commercial real estate.

RECENT studies have found out of the 8.8 million people in this country, only 1.5 million are dealing with their debt.

That’s just 17 per cent of the population who are tackling their debt problems head on. But what about the remaining 83 per cent?

Debt is something that affects everybody, no matter what walk of life they are from.

With up to 2.4 million households in the UK struggling to make their finances stretch until payday it’s no wonder debt is a very real and growing problem.

It’s commonly believed debt is a problem mostly faced by younger generations, however the average victim is actually likely to be a homeowner in their early forties.

There are also a growing number of people in their sixties and seventies who are suffering from the crippling financial burden.

People dealing with debt are often afraid and ashamed and as a result will not share the problem with their family members, instead preferring to keep it to themselves.

They might be so afraid that they haven’t slept for months. They most probably ignore the post and jump every time the doorbell rings.

As a result, this silent struggle of debt has a detrimental affect on both physical and mental health, leading to stress and anxiety, depression, drug and alcohol dependency, marriage and family breakdowns, suicidal thoughts and, in extreme cases, suicide.

That’s why if you are struggling with debt it is important to get help and remember that you are not alone.

Knowledge is power, and by talking to expertly trained professionals who offer specialist debt advice you can take your first steps towards debt freedom.

Evesham Debt Advisors (EDA) has helped thousands of people in the UK and can help you tackle your debt monster head on.

EDA is authorised and regulated by the Financial Conduct Authority and the Debt Resolution Forum and the Association of Professional Debt Solution Intermediaries.

EDA can be contacted on 0800 472 5050 from a landline or 01386 760000 on a mobile.

Further free advice is also available from StepChange, The CAB and The Money Advice Service.

LJUBLJANA Nov 27 (Reuters) – Bad loans in Slovenian banks,
which almost forced the country into an international bailout
last year, rose to 15.7 percent of all loans in September from
14.8 percent a month before, the Bank of Slovenia said on
Thursday.

The loans, whose repayment has been delayed by 90 days or
more, reached 6.2 billion euros in September or almost 18
percent of the countrys GDP, up from 5.9 billion a month
earlier.

Last year the government poured more than 3 billion euros of
its own funds into local banks, which are mostly state-owned, to
prevent them from collapsing under a large burden of bad loans
and enable the country to avoid a bailout.

In spite of that, two of the banks that were bailed out last
year, Nova Ljubljanska Banka and Nova KBM, narrowly failed the
ECB stress test in October but said they would cover the capital
shortfall revealed by the test from their 2014 profits.

According to the Bank of Slovenia, the countrys banks had a
joint net profit of 108.2 million euros in the first nine
months, compared to a loss of one billion euros in the same
period of 2013.

The amount of loans to businesses, households and the state
fell by 20.1 percent in the first nine months as banks became
more conservative when extending loans.

Bank of Slovenia Governor Bostjan Jazbec said on Wednesday
the banks credit activity would only pick up once Slovenias
economy was back on a growth track and urged the government to
boost investment.

The Small Business Administration will be holding a free training workshop to discuss small business loans on Nov. 19. The workshop will cover the SBA Express Loan Program, which is designed to provide access to financing for small businesses, offering reduced documentation requirements and a quick approval process, according to a press release. Registration for the workshop is required and limited to 25 participants on a first-come first-serve basis, the release states. The workshop will be from 9:30 to 11:30 am at Coast 360 Federal Credit Union in the Community Room.